Section 67 of CGST Act Explained: Powers of Inspection, Search & Seizure Under GST

Section 67 of the CGST Act, 2017 empowers GST authorities to inspect, search, and seize goods, documents, or premises when there are valid “reasons to believe” that tax evasion has occurred.

It outlines the procedures for authorized inspections, execution of search warrants, provisional seizure, retention and return of documents, and disposal of specific goods. The section also permits forcible entry when access is denied, allows “mystery shopping” to verify invoice compliance, and applies relevant provisions of the CrPC for legal oversight, ensuring transparency and accountability in enforcement.

Introduction: Understanding the Enforcement Backbone of GST

Section 67 of the Central Goods and Services Tax (CGST) Act, 2017, plays a crucial role in safeguarding the integrity of India’s GST regime. By empowering tax authorities with robust enforcement tools such as inspection, search, and seizure, it strengthens the government’s hand in combating evasion and ensuring compliance. Whether you’re a taxpayer, GST practitioner, or student, understanding this section is vital to appreciate how tax law is enforced in practice.

Stay with us as we break down each provision of Section 67 in simple yet comprehensive terms. 👇

Inspection and Search Authorization (Sections 67(1) & 67(2))

Before any inspection or search is carried out under the CGST Act, tax officers must meet a legally defined threshold — “reasons to believe.” This phrase carries weight in law and isn’t open to arbitrary interpretation. The officer must rely on credible, concrete information, not just assumptions or doubts. These provisions ensure that the enforcement actions are fair, traceable, and justified.

Let’s understand the nuances of inspection and search authorizations step by step.

🔹 Inspection under Section 67(1)

Who authorizes?
An officer not below the rank of Joint Commissioner can authorize any other officer to inspect business premises.

When is it allowed?
When there are reasons to believe that the taxpayer is:

• Suppressing transactions or stocks.
• Claiming excess Input Tax Credit (ITC).
• Violating GST laws to evade tax.

Scope of Action
Not limited to registered taxpayers. It includes transporters, warehouse operators, and any person in possession of suspected tax-evaded goods.

Documentation
Authorization must be given in writing using FORM GST INS-01.

🔹 Search and Seizure under Section 67(2)

Search and seizure go beyond inspection. These actions kick in when documents, goods, or evidence are suspected to be hidden.

Key Grounds for Search:

• Goods are liable for confiscation.
• Crucial documents are concealed.

Legal Requirements:

• A search warrant (FORM GST INS-02) is mandatory.
• Presence of two independent witnesses is required.
• A seizure memo must be drawn detailing every item seized.

This ensures procedural fairness while granting strong operational tools to GST officers.

Provisional Seizure and Retention of Goods and Documents

Seizure is not always about physically moving goods. The law provides flexibility for officers when goods are large, hazardous, or logistically difficult to seize. At the same time, it ensures that due process is followed in handling documents and records.

Here’s how the CGST Act strikes a balance between enforcement efficiency and taxpayer rights.

🔹 Provisional Seizure

If goods can’t be taken away physically, the officer may issue an Order of Prohibition (FORM GST INS-03). This restricts the movement or usage of those goods until further notice.

This way, the law still enforces control without disrupting logistics unnecessarily.

🔹 Retention of Documents

• How long can documents be held? As long as required for investigation or legal proceedings.
• Return requirement: If not used in a show-cause notice, they must be returned within 30 days of such issuance.
• Right to copies: Taxpayers have the right to make copies or take extracts in the presence of an officer (Section 67(5)).

This provides legal safeguards and prevents misuse of power while allowing authorities to gather necessary evidence.

Access and Forcible Entry (Section 67(4))

The CGST law doesn’t stop at paper powers—it ensures officers can act if obstructed. Section 67(4) gives officers the authority to forcibly gain access if they are prevented from entering a premises or accessing locked documents or storage.

This ensures that non-cooperation doesn’t become a shield against inspection.

🔹 When is forcible action allowed?

• If entry to a place is refused or obstructed.
• If access to electronic records, lockers, or documents is denied.

🔹 What can the officer do?

• Seal or break open doors, containers, lockers, or gadgets.
• Document the action and proceed with the investigation.

This clause ensures that the enforcement powers are practical, not merely theoretical.

Release and Disposal of Seized Goods

Section 67 also outlines the procedure for provisional release and eventual disposal of seized goods. This promotes transparency, reduces inventory burden on the department, and protects businesses from prolonged asset seizure.

Let’s look at how the law handles seized goods systematically.

🔹 Provisional Release (Section 67(6))

How to apply for release?

• Submit FORM GST INS-04 with a bond and security, or
• Pay applicable tax, interest, and penalty outright.

Governed by: Rule 140 of CGST Rules, which details the format and conditions.

🔹 Return of Seized Goods (Section 67(7))

Default Time Limit: 6 months from the date of seizure.

Extension Allowed: By another 6 months, with recorded reasons.

This clause ensures that goods are not held indefinitely and encourages timely action from tax authorities.

🔹 Disposal of Certain Goods (Sections 67(8) & 67(9))

Goods that are perishable, hazardous, or of depreciating value are handled differently.

As per Notification No. 27/2018-Central Tax, such items include:

• Perishables: Salt, fresh produce.
• Hazardous: Fireworks, chemicals.
• Fast-depreciating: Newspapers, raw hides.

Procedure:

• Officer prepares an inventory.
• Disposal is done as per Commissioner’s instructions.

This ensures economic and safety considerations are taken into account.

Additional Powers and Procedures

Section 67 doesn’t just stop at goods. It also empowers officers to seize documents during hearings, conduct mystery purchases to check tax compliance, and follows the legal discipline of the Code of Criminal Procedure (CrPC).

Let’s unpack these supporting provisions.

🔹 Coercive Powers (Section 67(11))

• Officers can seize documents shown to them voluntarily if they have “reasons to believe” evasion is involved.
• A receipt must be issued, and documents can be retained for relevant proceedings.

🔹 “Mystery Shopping” (Section 67(12))

• The Commissioner can authorize someone to act as a customer.
• Purpose: To check if proper invoices/bills are issued.
• If goods are returned, the business must cancel the invoice and refund the amount.

A modern tool for verifying compliance without alerting the taxpayer.

🔹 Legal Compliance under CrPC (Section 67(10))

• Applies search & seizure rules of CrPC, 1973, ensuring legality and fairness.
• Section 165(5) is modified: reports are to be submitted to the Commissioner, not Magistrate.

This helps maintain administrative control while ensuring accountability and procedural integrity.

Final Thoughts: Why Section 67 Matters to Every GST Stakeholder

Section 67 of the CGST Act is not just a provision—it’s a safeguard for the Indian tax ecosystem. It deters tax evasion, ensures quick evidence collection, and builds trust in the system through fair and lawful procedures. Whether you’re a business owner, tax consultant, or student, understanding this section helps you stay compliant and prepared for any inspection scenario.

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FAQs on Section 67 of CGST Act 2017

What is Section 67 of the CGST Act, 2017?
Section 67 empowers GST officers to inspect, search, and seize goods, documents, or premises when there are valid reasons to believe that tax evasion has occurred.

Who can authorize an inspection under Section 67?
An officer not below the rank of Joint Commissioner can authorize a subordinate officer in writing to conduct an inspection.

What form is used to authorize an inspection?
FORM GST INS-01 is used for authorizing an inspection under Section 67(1).

What triggers a search under Section 67?
A search can be initiated if there are reasons to believe that goods liable for confiscation or documents relevant to proceedings are concealed.

Is a warrant required for search under Section 67?
Yes, a search warrant in FORM GST INS-02 must be issued before conducting a search.

Can documents and goods be seized during inspection?
Yes, if the officer has valid reasons to believe they are necessary for proceedings, they can be seized during or after inspection.

What is the meaning of ‘reasons to believe’?
It refers to a higher standard than suspicion and requires credible, verifiable information that suggests tax evasion or concealment.

What happens if physical seizure of goods is impractical?
The officer can issue an Order of Prohibition in FORM GST INS-03 to restrict movement or use of such goods.

How long can seized documents be retained?
Documents can be retained as long as necessary, but if not used in a show-cause notice, they must be returned within 30 days of its issuance.

Can the taxpayer take copies of seized documents?
Yes, the person from whom documents are seized has the right to take copies or extracts in the presence of an authorized officer.

What if access is denied during inspection or search?
The officer is empowered to forcibly access locked premises or containers by sealing or breaking them open under Section 67(4).

Is provisional release of seized goods allowed?
Yes, goods may be released provisionally on furnishing a bond and security, or on payment of applicable tax, interest, and penalty.

Which form is used for provisional release?
FORM GST INS-04 is used for furnishing bond and security for provisional release of seized goods.

What is the time limit for retaining seized goods?
Seized goods must be returned if no show-cause notice is issued within six months, extendable by another six months with written reasons.

Can certain goods be disposed of immediately?
Yes, perishable, hazardous, or depreciating goods can be disposed of quickly as per Section 67(8) and 67(9).

What notification lists disposable goods?
Notification No. 27/2018-Central Tax specifies goods that can be disposed of promptly, such as perishables or hazardous materials.

Can GST officers seize documents shown voluntarily?
Yes, under Section 67(11), officers can seize such documents if they believe tax evasion is involved.

What is the mystery shopping provision?
Section 67(12) allows the Commissioner to authorize someone to act as a customer to check if invoices are properly issued by taxpayers.

What happens if goods bought under mystery shopping are returned?
The taxable person must refund the amount and cancel the tax invoice if the goods are returned by the authorized person.

Are CrPC provisions applicable to GST searches?
Yes, Section 67(10) applies relevant provisions of the Code of Criminal Procedure, 1973, to ensure lawful and fair search and seizure.

Who receives the search report under GST?
Instead of the Magistrate, as per CrPC, the search report must be submitted to the Commissioner under GST provisions.

Can warehouse operators or transporters be inspected?
Yes, if they are suspected of storing or transporting goods to evade tax, they can be inspected under Section 67.

Is the presence of witnesses mandatory during search?
Yes, the search must be conducted in the presence of two independent witnesses to maintain transparency and legality.

What is FORM GST INS-02 used for?
It is the official search warrant required to conduct a search under Section 67(2).

What happens to seized goods if the taxpayer doesn’t comply after bond execution?
If goods are not provisionally released within one month of bond execution, they may be disposed of as per law.